Bank charges: the phoenix from the flames?

The bank charges reclaiming campaign is not over despite the blow of the Supreme Court ruling in favour of current account providers in the landmark test case.

Instead, it is claimed the clock has effectively been turned back to pre-July 2007 before the Office of Fair Trading (OFT) brought its case against current account providers. At that point most claims were put on hold but that suspension has been lifted today.

The OFT has lost its argument that it can assess charges for fairness on a complicated legal principle under Regulation 6 of the Unfair Terms in Consumer Contracts Regulations (Read a quick Q&A in the Bank charges Q&A: Door reopened for reclaimers? MSE News story).

The main thrust of that argument was that charges must reflect the cost to the firm of providing a service, and that fees of £35 or so are far too high.

New opportunity

However, the OFT now has the option to relaunch a challenge on different grounds. The Supreme Court has even suggested it uses grounds under Regulation 5, was part of its original argument before the case got to the UK's highest court.

That states the level of fees has to be agreed between both parties in good faith and they must not cause "a significant imbalance in the parties' rights and obligations to the detriment of the consumer".

The Supreme Court states in its summary of the case: "The charges might still be open to assessment by the OFT on other grounds under Regulation 5."

And Jonathan Richards, a partner at law firm Eversheds, adds: "There may be other aspects of terms and conditions which can be challenged. It could be argued that the clock has been turned back."

The OFT says it will announce its next step in December.

Martin Lewis, MoneySavingExpert.com creator, says: "The initial shock reaction in the court covered what was a key element of the Judge's final statement that 'the OFT may be able to look at fairness by another route'.

"The fact this was deemed important enough to be said in his very short verbal statement is of great significance. After analysis of the report it reveals the court's coded message to the OFT was: 'You took this case on one legal basis, but there are other avenues contained in clause 5 that you could try.'

"This afternoon, MoneySavingExpert.com is putting the final touches to hiring a senior banking QC to redraft our template letters on this basis.

"This is to look at amending the documents for those who've already gone to court and designing new templates for others to claim, to look at the viability of challenging the charges under another basis.

"People are signing up to our site's email in droves waiting for the new template letters to come out.

"The Supreme Court ruling said that bank charges can't be unfair judged on price.

"The aim of clause 5 is that as people's contracts with the banks weren't negotiated individually, they must have been made in good faith, and not cause a significant imbalance to the detriment of the consumer.

"Our current provisional view is there are potential arguments to show detriment to the consumer, though forumulating those legally is going to take time and work.... but the door is still open.

"It is very likely the OFT will be considering exactly these points of law too to see what can be done and whether it will continue its challenge.

"The Judge's other main verbal point was the Supreme Court believes overdrafts are part of the price of a bank account – and if so it is possible it comes under the FSA's jurisdiction and therefore there's an outside chance it may signal that consumers can make a misselling claim.

"Overall, the news today is we thought we'd been trounced, but while it was a loss, and there's still no guarantee people will be able to reclaim their cash, the margin of defeat was narrow.

"And with the new class action law likely to come in soon, this may be a perfect first case to push for a speedy resolution."

Claims on hold

Marc Gander, a lawyer, and co-founder of the Consumer Action Group, says anyone who has made a claim or plans to make a claim under Regulation 6 will lose their case. However, any claim under different grounds has to be considered by a court.

Over a million claims are currently on hold, 15,000 of which are on hold with the Financial Ombudsman Service, the independent complaints arbitrator. The Ombudsman says it needs time to consider the judgment before announcing what happens to those cases.

The Financial Services Authority has said today the waiver which allowed banks to suspend most charges complaints has been lifted following the judgment. This means banks will have to consider claims.

Gander says: "We were devastated at the beginning but once we had time to reflect on the judgment the OFT has litigated on the wrong issue.

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